JPMorgan Chase and Citibank Have $2.96 Trillion in Exposure to Credit Default Swaps

JPMorgan Chase and Citibank Have $2.96 Trillion in Exposure to Credit Default Swaps By Pam Martens and Russ Martens for Wall Street on Parade

According to the most recent report from the regulator of national banks, the Office of the Comptroller of the Currency (OCC), JPMorgan Chase has exposure to $1.2 trillion in Credit Default Swaps while Citibank has exposure to $1.76 trillion for a combined total of $2.96 trillion as of September 30, 2019.

According to the same report, the total exposure to Credit Default Swaps among all national banks in the U.S. is $3.7 trillion – meaning that just these two banks are responsible for 80 percent of that exposure.

As of this past Friday, JPMorgan Chase had lost 39.3 percent of its common equity capital in the past five weeks while Citigroup, parent of Citibank, had lost 51.7 percent. That left JPMorgan Chase with just $256.68 billion in market cap versus Citigroup’s meager $79.86 billion.

Credit Default Swap Exposure at JPMorgan Chase and Citibank

One of our readers emailed us today asking if Credit Default Swaps were still around after they had collapsed Wall Street and the U.S. economy during the 2008 financial crash. Not only are these derivatives of mass destruction still around thanks to lapdog federal regulators and a timid Congress but two of the most dangerous banks in America have not just purchased protection through Credit Default Swaps, but they have sold protection (taken on the risk of a defaulting corporation or credit) to the tune of $1.5 trillion.

Since the repeal of the Glass-Steagall Act in 1999, these giant Wall Street casino investment banks have been allowed to own some of the largest federally-insured banks in America where moms and pops hold their life savings. JPMorgan owns the federally-insured Chase Bank which has more than $1.6 trillion in deposits. Citigroup owns Citibank which holds approximately $1 trillion in deposits.

It’s certainly not that the federal regulators think that these two banks know how to manage risk and thus they can be trusted with Credit Default Swaps. Citigroup was the biggest basket case among all federally-insured banks during the 2008 financial crisis. Citigroup received the largest taxpayer-bailout of any bank in U.S. history as its stock went to 99 cents. Its bailout haul included an infusion of $45 billion in capital from the U.S. Treasury; a government guarantee of over $300 billion on its dubious “assets”; a guarantee of $5.75 billion on its senior unsecured debt and $26 billion on its commercial paper and interbank deposits by the FDIC; and a secret revolving loan facility from the Federal Reserve that sluiced a cumulative $2.5 trillion in below-market-rate loans from 2007 to the middle of 2010. (See chart below from the Government Accountability Office audit.)

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Mission: Wall Street On Parade hopes to level the playing field between Wall Street and the 99 percent. Wall Street is a jungle of devices to effect an institutionalized wealth transfer system. The goal of this web site is to provide the jungle guide to the 99 percent in the hope of bringing about citizen-inspired change.